Another ROTH Question

[Jerry1]

I have been unable to make ROTH contributions in the past due to MJF AGI limitations. This year DW retired and I work part time. Both of us are over 50 so the limit is $6,500. My question is that for both of us? Can we contribute a combined $13,000? My wife worked a couple months so she would have enough earned income as do I. I'm assuming each person needs to set up their own account and have their own earned income.

Is my understanding correct?

Note, we both have 401K's and made 2016 contributions if that makes any difference. Is earned income the same as taxable income (after the 401k contribution)?

 

[GrayHare]

The necessary $13,000 in earned income can be earned by one of a married couple, or be their combined total. With that each can contribute $6500.

 

[Jerry1]

Sweet. Thanks. That means as long as I continue to work (which working part time isn't too bad), I can move $13,000 or so into a ROTH. Great news.

 

[kaneohe]

Typically the applicable compensation is in box 1 of the W2 which is generally
your gross income less pre-tax deductions like 401K and other items you pay pre-tax.

https://www.irahelp.com/slottreport/what-compensation-making-ira-contribution

Compensation

W-2 Income Wages, salary, tips, bonuses, professional fees, amounts received for performing personal services and certain scholarship or fellowship payments. The safe harbor is the amount reported in box 1 of Form W-2 reduced by any amount in box 11.

 

[Jerry1]

Thanks. Thankfully that won't matter. It was DW who would have had a problem since she contributed about 50% of her income into the 401K and only worked part of the year. Since I can use combined income, it won't be a problem.

 

[Sunset]

If your work is self employment you could contribute a lot more with a self-401K. This is not available if you are an employee.